illumin8ing the 2018 Budget

The 'hear hears' have subsided, suits and ties removed and we wait for the obligatory opposition response. Our team has been cutting through the crap to identify some of the aspects of the budget that impact YOU.

Another year, another budget and another late-night party
for the crew at Illumin8.

We broke out the budget bingo cards, placed a few friendly
bets (will #scomo smile or not) and waited in anticipation for the speech that
draws the attention of maybe 12% of the nation.

Well, it looks like this year’s budget is one that
definitely tries to show that your little brother that has been a pain in your
butt for a while has had a change of heart. Possibly because he wants to borrow
your car for a road trip or something. The Turnbull government have announced a
range of gifts to various areas of our nation. The question is, what ones will
actually make it into law, and what will fade into the abyss. Will the
Coalition lose power in the next election (likely to happen pre May 2019) and
thus the replacing government throws the budget papers into the bin (hopefully
recycling) and start with their agenda?

So – team Illumin8 has some thoughts on changes that impact
our clients. Have a read, and if anything sticks out to you, give us a buzz!

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Individual Tax
Rates

The 2018 budget has proposed immediate changes to the Low
Income Tax Offset with 2019FY tax bills to be reduced up to $530 on a sliding
scale if you earn under $125,000 per annum.

In addition, the plan is to simplify tax brackets over the
next few years. The first change is to increase the upper limit of the 32.5%
tax bracket from $87,000 to $90,000 in the 2019FY, which is estimated to save
210,000 Australians a decent chunk.

From there, under additional changes in 2023FY and 2025FY,
the 37% tax bracket will be eliminated – resulting in Australians earning
between $41,000 and $200,000 paying a flat tax rate of 32.5%.

What does this mean for you? Is it feasible to have
Australians earning $41,000 being taxed at the same tax rate as those earning
$200,000? Will we see some form of levy charged to those at the higher end of
the bracket? We will keep you posted with what gets adopted by the government
so stay tuned!

20k Write Off

Although the budget centred around cuts to Income tax at the
individual level, there is some good news for small business owners as well.
Continuing as per last the last two tax years, the government has extended the
deadline for accelerated depreciation (immediate write-off) of assets that cost
under $20,000 until 30 June 2019.

Under regular depreciation rules, when you purchase an asset
for use in your business, you cannot claim the entire cost of the asset in your
income tax return for that year, you instead claim it over time. Under the
accelerated depreciation rules, small businesses are able to claim the entire
cost of an asset in the financial year they incurred it. These rules are simply
moving when you claim the tax deduction, not a tax cut. Regardless, still a
massive win for the small business owner where cashflow is everything.

But as we always say, just because it’s tax deductible
doesn’t mean you should buy it!

Superannuation

As the government continues to look at the future cost of
caring for the aging population, this Budget is making it easier for younger
people to grow their superannuation balances through:

- Removal of
super exit fees when moving your balance to a new fund (ordinally no more than
$50);

- Making it
easier to find and combine inactive super account balances;

- Removal of
automatic life insurance policies being taken out on new super accounts for
individuals younger than 25.

In addition to the above, from 1 July 2018, eligible first
home buyers will be able to apply to withdraw their extra super contributions
made since 1 July 2017 to use a deposit for a home. If this is something you
are considering, or interested in knowing how this could impact you, we
recommend getting in touch with a financial adviser.

Pension Work Bonus

#SCOMO announced that the government is set to increase the
work pension bonus, allowing pensioners to earn up to $7,800 a year without
impacting their pension payments.

This would mean pensioners could earn an extra $1,300
without affecting their payments and, for the first time, the work pension
bonus will extend to self-employed pensioners! Great news!

If you are at pension age, we would recommend teeing up a
time with a financial advisor to see if this impacts you.

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So who is the real
winner of #Budget2018?

Without a doubt, it was the moment when #SCOMO was being
interviewed by Leigh Sales and she managed to get him to say doodoo. Everyone
loves a poo joke.

Victorian Budget
Snapshot

Whilst the federal budget is all full of bells and whistles,
the Victorian budget had a few announcements at the same time.

The main one impacting small businesses revolves around
Payroll Tax.

The cost of employment for those with large workforces will
drop slightly with a change to the payroll tax rates. Businesses in regional
areas will now only pay 2.45% on payroll costs in excess of $650k (half the
rate for other businesses).

The $650k threshold is an increase of 25,000 from the
current year.

So, What Now?

Want to know if any of the above changes will impact you
specifically? Let’s catch-up and organise a Tax Planning meeting to plan in
detail what you need to do prior to 30 June to ensure you’re paying less tax.